Print scandal firm revealed

By Reid Sexton, Josh Gordon and Ben Butler

June 16, 2011 — 12.00am

A FAMILY-RUN business in Melbourne's east is believed to be at the centre of a scandal in which corrupt state public servants paid massively inflated prices for print cartridges in exchange for gifts such as iPhones and shopping vouchers.

The scandal was revealed yesterday in a scathing report by state Ombudsman George Brouwer and has prompted a review of Arts Victoria management.

Ted Baillieu says the public should know who the printing supply company are.

The investigation was launched after Western Australia's Corruption and Crime Commission disclosed that it was investigating a Victorian-based company that offered gifts to WA public servants if they paid exorbitant rates for cartridges.

Public hearings in 2009 heard that WA government bodies buying toner cartridges from Consumable Management Group - based in Melbourne's east at Notting Hill and which traded under different names - spent $316,000 more over three years than they would have if they had used government suppliers.

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That company and a number of other printer suppliers, including The Better Image, are run by Melbourne's Pegoli family from the same Clayton Road address.

While the Ombudsman did not name the company it investigated, the report said it was the same company that was found to have cost the WA government "$300,000 over [three years]".

The Age tried to contact Better Image chief Leo Pegoli yesterday, but was told by a spokesman he was not available. The spokesman said, "Not at all," and hung up when asked to comment on the Ombudsman's report.

The Pegoli family was behind a failed bid in 2008 to stop ANZ selling $25 million worth of shares it seized from collapsed stockbroking firm Opes Prime, of which the family were clients.

The Ombudsman's probe into the purchase of cartridges also uncovered a widespread culture of graft inside Arts Victoria, where staff frequently accepted - and did not declare - complimentary opera, theatre and ballet tickets. In a damning assessment, Mr Brouwer said Arts Victoria director Penny Hutchinson's justification that the gifts related to staff members' professional roles was "naive" given many of the providers of the benefits survived on the basis of grants offered by the state government.

Mr Brouwer also slammed Ms Hutchinson for being reluctant to come to grips with a lack of management and auditing that had "allowed the corrupt conduct to go undetected".

In a series of findings, the report provided details of how tens of thousands of dollars of public money had been wasted buying non-genuine printer cartridges at wildly inflated prices in exchange for iPhones, MP3 players, an LCD television set and thousands of dollars in gift vouchers.

The report also details how public servants doctored invoices and destroyed records to cover their tracks.

The worst abuses occurred at Arts Victoria, where a project officer received gifts worth $8000 for ordering printer toner cartridges through the Melbourne-based company at a cost of up to $369 each. The government-authorised seller was offering the same item for $99.

The Ombudsman estimated that the same woman also bought enough black toner cartridges to supply the department for 40 years. Toner cartridges expire after two years.

It found the woman, who resigned during the investigation, had spent almost $81,000 more than was necessary over 3 years on 55 black toner cartridges and 74 colour toner cartridges. In exchange, she received $8000 in prepaid Visa cards and Coles Myer vouchers.

The woman told the Ombudsman's office she had been "hounded" by the printing supplies company. Despite this, she said she "honestly believed it was saving Arts Victoria money" by buying cartridges.

She said she had spent most of the benefits on "food and sometimes I might have bought myself something... I saw the gifts as an ability to get me through what was a very tough period of time."

The investigation also found 66 schools and a Victorian prison had bought toner cartridges from the company last financial year, with staff including an assistant principal of a primary school, receiving a video camera, LCD television set, a digital photo frame and gift vouchers from a variety of stores.

Premier and Arts Minister Ted Baillieu said the public should know who the printing supplies company was.

He said he was "not averse" to the idea of a police investigation if it was recommended by the Ombudsman.

"What I'd like to do with that is to check with the Ombudsman in that regard and if that's necessary than that would happen," he said.

Mr Baillieu also revealed he had phoned Ms Hutchinson to make it clear any extravagance would not be tolerated, with a management review set to examine whether policies relating to purchasing and hospitality were being properly applied.

"We will put a stop any extravagance that might exist and we have seen that recently with Film Victoria," he said.

A Victoria Police spokeswoman said yesterday it would investigate if a complaint was made, but it was not clear last night if one had been lodged.